"The bubble has burst as the reality of a difficult regulatory landscape sunk in"

It was only a year ago that exuberance enveloped the marijuana industry. Legalization was spreading and the growth potential seemed boundless.

But that bubble has burst as the reality of a difficult regulatory landscape sunk in. Since March, stocks are down by about two-thirds. Capital markets have largely frozen for all but the strongest companies. And now a cash crunch is leaving some on the verge of going bust. Only, thanks to the illegal status of cannabis under U.S. federal laws, firms there are blocked from seeking protection in bankruptcy court.

The industry’s problems have become so dire that one senior executive at a large cannabis company predicts that as many as a dozen smaller companies may fail by the second quarter of 2020. The executive, who asked not to be identified and declined to name specific firms, said that in the past three months companies have been calling more frequently with urgent, last-ditch attempts to be acquired.

Some of those companies, which are both public and private, are two to four weeks away from missing payroll and none of them is an attractive takeover target, the executive said.